In a project where a .git directory is deleted, then that folder is not identified as a repo by Git and therefore the command of git status cannot work. VS Code, however, scans parent directories containing .git and continues to display the project as a part of a repo when it finds one higher up the tree. In order to correct this, either delete the parent .git directory or set git.openRepositoryInParentFolders to never. In case of the second option, also visit https://code.visualstudio.com/docs/sourcecontrol/faq#_why-isnt-vs-code-discovering-git-repositories-in-parent-folders-of-workspaces-or-open-files